Tips on How to Avoid Wage & Hour Lawsuits

Recently I have been discussing the rise in wage and hour litigation.  See here and here

According to the Department of Labor approximately 70 percent of businesses are out of compliance with wage and hour laws.  That's right - 70 percent!  According to Shanti Atkins of the Compliance Training Blog, some experts believe this number is even higher.

But you might be asking yourself, "How could my business be out of compliance?  Everyone is salary.  I don't need to pay overtime.  Besides employees can volunteer their time."  As Mark Twain said,

It ain't what you don't know that gets you into trouble.  It's what you know for sure that just ain't so.

So what are some helpful tips to avoid wage and hour lawsuits?

  • Conduct a Wage and Hour Review.  Your first step should be to get with an employment law attorney or other wage and hour/human resources specialist who can review your pay practices to determine whether you are in compliance with the law.  The cost spent for a review and developing a compliance program could save you tens of thousands of dollars in the long run or perhaps even millions if you run a large company. 
  • Train Managers.  Making sure managers understand the rules is paramount.  Managers can avoid costly mistakes and spot problems before they become too costly.
  • Think Exempt - Non-Exempt, Not Just Salary - Hourly.  Too many employers pay employees a salary and then believe that relieves them from any obligation to pay overtime.  Employees need to make sure those employees are properly classified as exempt (someone who is typically not paid overtime) or non-exempt (someone that is generally entitled to overtime).
  • Take Complaints on Wage Issues Seriously.  You want to treat wage and hour complaints just as seriously as employment issues including harassment or discrimination.  In fact, these wage and hour lawsuits could be more costly to your business.
  • Do Not Retaliate.  Never, never, never retaliate against someone that makes a complaint for wage and hour issues.
  • Develop strong policies on pay practices and employee hours.  Make sure employees work those hours assigned and do not work off-the-clock.  Above all, properly document the number of hours worked because just like in baseball where a tie goes to the runner - if the employer has not documented the hours worked by the employee - the benefit of the doubt will go to the employee. 

The Department of Labor Web site is an excellent place for more information or please feel free to let me know if you desire more information on wage and hour reviews.

Update:  SMBTime blog had a great point in a follow up to this blog post regarding the fact that businesses should consider hiring an attorney to conduct the wage and hour audit so as the maintain the attorney-client privilege. 


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Comments (4) Read through and enter the discussion with the form at the end
Dan Schwartz - November 19, 2007 3:22 PM

Good points. One problem that occurs is that supervisors or inexperienced HR generalists make quick decisions on calling someone exempt/non-exempt without understanding the distinctions. In addition, as new people are added to a company, this problem is compounded because no one revisits the original classification. An audit of key positions is a good way to reduce liability exposure, particularly because "intent" is not needed to prove a wage/hour violation.

Anthony Zaller - November 19, 2007 3:23 PM

Great post. I would also add that employers conducting business in other states closely examine each state's specific labor code for additional requirements above and beyond the FLSA. For example, California mandates meal and rest breaks and prohibits employers from having use-it-or-lose-it vacation policies.

Richard Geller - November 20, 2007 11:40 AM

good post, very good. I commented on my blog today. Thanks!


Bill Grell - November 30, 2007 11:13 AM

No one likes to pay their attorneys, particularly to look at employment practices that have never been challenged and for which an employer has never had a controversy arise. However, in addition to the insights shared by Rush, I would remind employers that the FLSA as well as other perinent statutes (the Iowa Wage Payment Collections Act) can result in an award of an employee's court costs and attorneys' fees. So, failure to comply can cost an employer attorneys' fees for both parties. An ounce of prevention, indeed, can go a long way!

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